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Stealing Time

“I want to use the time it takes.”

-Per Peterson

 

As opposed to what I usually do when I’m reading non-fiction, I don’t dog-ear many pages when I read a novel. The aforementioned quote is a simple one for type-A types in this profession. It comes from Peterson’s acclaimed novel, Out Stealing Horses.

 

Time is important to me now, I tell myself. Not that it should pass quickly or slowly, but be only time, be something I live inside and fill with physical things and activities that I can divided it up by, so that it grows distinct to me and does not vanish when I am not looking.” (Out Stealing Horses)

 

That is all. I just wanted to share it with you. It’s a blessing to be able to work with my teammates and produce something distinct every morning. Thank you for taking the time to read our thoughts.

 

Back to the Global Macro Grind

 

Three consecutive up days for the SP500 (taking it to within 1.7% of her all-time high of 1669) as the Russell 2000 powers forward to make its 2nd consecutive all-time high in as many trading days (+18.8% YTD to 1,009). That’s progress.

 

So are US employment growth expectations rising alongside:

 

A)     Rising Bond Yields

B)      Falling Equity Volatility

 

In Hedgeye quant-speak, that means:

  1. SP500 is back in a Bullish Formation (bullish on all 3 of our core risk management durations, TRADE/TREND/TAIL)
  2. US Equity Volatility (VIX) is back in a Bearish Formation with immediate-term TRADE resistance = 16.39
  3. US Treasury 10yr Bond Yields remain in a Bullish Formation (with immediate-term TRADE support 2.33%)

As growth expectations rise, slow-growth securities (Bonds, MLPs, Utilities, etc.) fall:

  1. US Consumer Discretionary stocks (XLY) = +3.39% July-to-date
  2. US Financials (XLF) = +2.67% July-to-date
  3. US Utilities (XLU) = -0.53% July-to-date

In other words, one of these things (XLU) is not like the others. #StrongDollar and #RatesRising gets the consumer paid, not the banker and/or ETF manufacturer who is pushing you Yield-Chaser product.

 

*Key Word Score in 2013 = #expectations

 

Mr Market couldn’t care less what Captain Valuation thinks about a mining security. Mr Market is all about the rate of change in expectations. And right now, expectations are rising that #GrowthSlowing is still yesterday’s war.

 

From a US stock market factoring perspective, here’s another way to look at that relative to the SP500’s +15.0% YTD gain:

  1. Low Yield Stocks = +22.9% YTD
  2. Top 25% EPS Growth Stocks = +19.4% YTD
  3. High Beta stocks = +17.5% YTD

High Yield Stocks (i.e. slow growth) are only +11.2% YTD. Whether you are long Tesla (TSLA) (which is replacing Oracle (ORCL) in the Nasdaq 100 today), or you’re short sketchy MLP companies, you are just loving this expectations shift versus the consensus.

 

Don’t let jimmy pundit confuse you  - for the entire year the #OldWall hasn’t been Bullish Enough on the US Dollar, Bond Yields, and Growth Expectations. At the beginning of 2013, the sell-side’s average “year-end target” for the SP500 was only 1531.

 

Today, the SP500 is obviously 109 handles higher than that, and the VIX is -18.0% for the YTD. Only 43.8% of investors surveyed in the most recent II Bullish/Bearish Survey admitted they are bullish.

 

Are we discounting too much growth too fast? Or are we just normalizing a pervasively bearish growth expectation in the political economy? I don’t know. All I know is that I will not let consensus’ bearish baggage get me down.

 

Life is too short to not enjoy the up moves. If I can steal more of the good times, I’ll take them.

 

Our immediate-term Risk Ranges are now:

 

UST 10yr 2.56-2.74%

SPX 1

VIX 14.12-16.36

USD 83.47-84.83

Yen 99.59-101.98

Brent Oil 104.93-108.36

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Stealing Time - Chart of the Day

 

Stealing Time - Virtual Portfolio


THE M3: MACAU TOURIST CURRENCY CHECK; WYNN MACAU UNIVERSITY INQUIRY

THE MACAU METRO MONITOR, JULY 9, 2013

 

 

MACAU CONSIDERS REQUIRING TOURISTS TO DECLARE CASH Bloomberg

Macau is studying a “cross-border cash declaration system, but no timeframe, declaration threshold or penalties are determined yet at the present stage,” Deborah Ng, director of the city’s Financial Intelligence Office, said in an e-mail yesterday.  Any controls imposed by Macau’s government would back China’s currency curbs, which restrict how much money Chinese tourists can take out of the country.

 

Travelers to Macau currently aren’t required to report how much cash they bring in when entering the city, said Daniel Tang, a press officer at the agency.

 

Tourists from mainland China can bring 20,000 yuan (US$3,260) when traveling across the border and withdraw as much as 10,000 yuan a day with each card at cash machines.  

 

WYNN RESORTS: SEC DOESN'T PLAN ACTION AFTER INQUIRY INTO MACAU UNIT WSJ

WYNN said that it had received word from the SEC that the agency wouldn't recommend a civil enforcement action against the casino operator following an informal investigation into the company's pledge to donate $135 million to a university in Macau.  "It is a charitable donation. We do it all the time just like everybody else," said Wynn. "We are fanatically compliant with the spirit and the letter of regulation."


THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – July 9, 2013


As we look at today's setup for the S&P 500, the range is 31 points or 1.31% downside to 1619 and 0.58% upside to 1650.                      

                                                                                                         

SECTOR PERFORMANCE


THE HEDGEYE DAILY OUTLOOK - 1

 

THE HEDGEYE DAILY OUTLOOK - 2

 

EQUITY SENTIMENT:


THE HEDGEYE DAILY OUTLOOK - 10


CREDIT/ECONOMIC MARKET LOOK:

  • YIELD CURVE: 2.29 from 2.28
  • VIX closed at 14.78 1 day percent change of -0.74%

MACRO DATA POINTS (Bloomberg Estimates):

  • 7:30am: NFIB Small Bus. Optim, June, est. 94.6 (prior 94.4)
  • 7:45am/8:55am: ICSC/Redbook weekly retail sales
  • 10am: JOLTs Job Openings, May, est. 3790k (prior 3757)
  • 11am: Fed to buy $2.75b-$3.5b notes in 8/15/2020-5/15/2023
  • 11:30am: U.S. to sell 4wk bills
  • 12pm: DoE Short-Term Energy Outlook
  • 1pm: U.S. to sell $32b 3Y notes
  • 4:30pm: API crude, oil product inventories

GOVERNMENT:

    • House Financial Svcs panel holds hearing with CFPB Acting Deputy Director Steven Antonakes on how CFPB collects and uses of consumer data, 10am
    • FDIC board meets to consider interim final regulatory capital rules including those needed for implementation of Basel III intl banking accords, 10am
    • House Financial Svcs panel holds hearing on Dodd-Frank Act, with witnesses including lawyer Boyden Gray, 2pm
    • House Energy and Commerce panel meets on “Cyber Espionage and the Theft of U.S. Intellectual Property and Technology,” with CSIS’s Jim Lewis testifying, 10:15am
    • NTSB holds first of two investigative hearings on 2012 New Jersey train derailment, haz-mat release, 9am

WHAT TO WATCH

  • FDIC meets to vote on final capital rules of Basel III
  • Glass Lewis backs Michael Dell $13.65-shr buyout offer
  • BlackBerry to hold annual shareholder meeting
  • China inflation stays below target; PPI falls 2.7%
  • CFTC weighs delay of swaps rules, WSJ says
  • U.S. apartment vacancies unchanged in 2Q, Reis says
  • DirectTV, Time Warner Cable meet deadline to bid on Hulu
  • Alcoa 2Q EPS, rev. beat; reaffirms 2013 aluminum outlook
  • Barnes & Noble edges closer to breakup as CEO quits
  • Shell names Van Beurden to succeed Voser as CEO
  • U.K. manufacturing unexpectedly falls in May
  • Greece wins release of $3.9b in aid from Europe

EARNINGS:

    • Wolverine World Wide (WWW) 6:30am, $0.34
    • Jean Coutu Group (PJC/A CN) 7am, C$0.26
    • Alimentation Couche-Tard (ATD CN) 11:45am, $0.77
    • Helen of Troy (HELE) After-mkt, $0.70

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

  • Commodity Traders’ Buildup on Easy Money Seen as Risk in Report
  • Gold Bulls Defy Price Slump as Paulson Loss Widens: Commodities
  • Copper Falls as Slumping Chinese Prices Reflect Slowing Economy
  • Russian Grain Harvest Seen Below Government Target After Drought
  • Gold Gains to One-Week High on China Inflation, Physical Demand
  • WTI Crude Trades Near 14-Month High Before U.S. Inventory Data
  • Coffee Reaches One-Month High on Supply-Curb Signal; Cocoa Gains
  • Gold-Dollar Deviation Signaling Shift of Faith: Chart of the Day
  • Hedge Fund Crude Oil Bets Jump Amid Egypt Strife: Energy Markets
  • Rebar Erases Gains to Decline as Overcapacity Damps Sentiment
  • Libya Oil Output Slides as Power Cuts Mix With Protests: Energy
  • Tanker Demolitions Slumping as Rupee Reaches Record Low: Freight
  • Quebec Explosion Exposes Risks of Rising Urban Oil Shipments
  • China’s Wheat Imports Seen Higher Than USDA Forecast After Rains

THE HEDGEYE DAILY OUTLOOK - 5

 

CURRENCIES

 

THE HEDGEYE DAILY OUTLOOK - 6

 

GLOBAL PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - 3

 

THE HEDGEYE DAILY OUTLOOK - 4

 

EUROPEAN MARKETS

 

THE HEDGEYE DAILY OUTLOOK - 7

 

ASIAN MARKETS

 

THE HEDGEYE DAILY OUTLOOK - 8

 

MIDDLE EAST

 

THE HEDGEYE DAILY OUTLOOK - 9

 

 

The Hedgeye Macro Team

 

 

 

 

 

 

 

 

 

 

 


Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.65%
  • SHORT SIGNALS 78.64%

We (Still) Don't Like China

Takeaway: Our view on China remains simple: We don't like it.

We still don’t like China. We’ve been clear on that. What’s going on there isn’t good.

 

Despite US equities rallying last week and into the close on Friday, Chinese equities were down another 2.4% overnight and are down 12% for the year. The Hang Seng also failed to bounce, down another 1.3% after failing at its immediate term TRADE line resistance. Indonesia was down 3.2%; Thailand down 2.4%. The only market above its TREND line in all of Asia is Japan. There are some big bad moves going on over in Asia.

 

So, is Asian growth slowing? Yes, that’s already happening.

 

Looking more closely at China, the Politburo (via President Xi), the PBoC (via Governor Zhou) and the State Council all came out at varying times last week and talked down market expectations for GDP growth and credit expansion going forward. With Manufacturing PMI hitting a 4-month low and Services PMI hitting a 9-month low in June, this does not bode well for China’s TREND duration growth outlook.

 

We (Still) Don't Like China - China GDP

 

Meanwhile, Bloomberg reports that President Xi Jinping said officials shouldn't be judged solely on their record in boosting GDP, the latest signal that policymakers are prepared to tolerate slower growth.

 

More to be revealed.


MEMORIES OF MAY

June casino revenues are being released by the states and the verdict is…

 

 

Longing for the good ol’ days of same store revenue declines of only 2%?  You may be after the final tally for June.  Illinois released dreadful figures this am with SSS down 10%.  We’re pretty sure Missouri will show a decline of around 11%.  Yes, there were some weather issues on June 1st and the calendar is down a Friday, but these numbers are even worse than what we were predicting.  Our estimate for June regional SSS was down 5% but given IL and MO, downside exists.  Remember that May was only down 2%.

 

We’ve got 3 charts included in this post.  The first is total regional same store revenue.  Note the significant sequential drop from May to June.  July should look better than June but that is due to a very easy comparison.  Please also note how historically accurate our predictions have been.  The second and third charts detail the specific markets of Illiniois and Missouri, respectively.  The other states will release their June figures over the coming 2 weeks.

 

We remain negative (and generally wrong lately) on the regional gaming stocks:  PNK, BYD, ISLE, and PENN.  The pie of slot customers is shrinking over the long-term but the impact is being felt now.

 

MEMORIES OF MAY - c1

 

MEMORIES OF MAY - c5

 

MEMORIES OF MAY - c7


Beware of Brent

Takeaway: Brent Oil is the biggest threat to our Q2 #GrowthAccelerating macro investment theme.

As many of you already know, our three Q2 Macro Themes here at Hedgeye were:

  • #StrongDollar
  • #EmergingOutflows
  • #GrowthAccelerating

All three of these themes have played out well.

 

That being said, we are keeping a close eye on what's going on in the Middle East right now. In particular, the violence in Egypt following the military-led ouster of Islamist president Mohamed Mursi.

 

The biggest threat to our #GrowthAccelerating investment theme is the price of Brent Oil which has caught a bid following the Egyption chaos. If Brent closes, and ultimately holds above the long-term TAIL risk line of $108.36, watch out.

 

We are keeping a close eye on this one.

 

Beware of Brent - Brent Oil 2

 

 


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